Asian shares slide as bank fears add to global gloom

People
are reflected in a display showing market indices outside a
brokerage in TokyoThomson
Reuters

By Hideyuki Sano

TOKYO (Reuters) - Asian shares slid on Friday as mounting
concerns about the health of European banks further threatened a
global economic outlook already under strain from falling oil
prices and slowdown in China and other emerging markets.

The prices of yen, gold and liquid government bonds of favored
countries soared as investors rushed to traditional safe-haven
assets.

"The markets are clearly starting to price in a sharp slowdown in
the world economy and even a recession in the United States,"
said Tsuyoshi Shimizu, chief strategist at Mizuho Asset
Management.

"I do not expect a collapse of major financial crisis like the
Lehman crisis but it will take some before market sentiment will
improve," he added.

Shares in Australia <.axjo> and South Korea <.ks11>
fell about 0.5 percent though MSCI's dollar-denominated index of
Asia-Pacific shares outside Japan <.miapj0000pus> was
little changed due to the fall in the
dollar.</.miapj0000pus></.ks11></.axjo>

Japan's Nikkei <.n225> fell 3.3 percent to a fresh 15-month
low as the yen soared to a 15-month high.</.n225>

The strengthening yen touched 110.985 to the dollar on Thursday,
rising almost 10 percent from its six-week low touched on Jan 29,
when the Bank of Japan introduced negative interest rates.

The currency last stood at 112.38 yen .

Japanese Finance Minister Taro Aso stepped up his verbal
intervention on Friday, saying he would take appropriate action
as needed, but the yen hardly reacted.

MSCI's broadest gauge of stock markets <.miwd00000pus> fell
1.3 percent on Thursday to 353.35, hitting its lowest level since
June 2013. So far this year it is down 11.5
percent.</.miwd00000pus>

It has fallen fell more than 20 percent below its record high
last May, confirming global stocks are in a bear market.

On Wall street, the U.S. benchmark S&P 500 <.spx> fell
1.23 percent to 1,829.08, its lowest close in almost two years
and down 10.5 percent for the year.</.spx>

The FTSEurofirst 300 <.fteu3> index of top European shares
sank 3.7 percent to its lowest level in 2-1/2
years.</.fteu3>

Financial counters led the losses globally as disappointing
earnings from Societe Generale added to the gloomy mood brought
on by poor results from Deutsche Bank last month.

Stress in the financial sector is stoking worries that funding
conditions for some companies may tighten even as many of the
world's central banks pump in funds through unorthodox measures.

A funding drought could be a death knell for some energy firms
that have struggled to make ends meet as oil trades at around a
quarter of its value just a few years ago.

In a worrying sign that Europe's debt problems could reappear,
the Portuguese 10-year bond yield surged above four percent for
the first time since 2014.

That is a clear departure from last year when investors, hunting
for yield, were buying up debt from Portugal and other indebted
countries.

In contrast, investors are now flocking to more liquid, and
higher-rated bonds.

The 10-year U.S. Treasuries yield fell to as low as 1.530 percent
, a low last seen in August 2012, which is just before the Fed
started its third round of quantitative easing. It stood at 1.657
percent in early Asian trade.

Federal funds rate futures almost completely priced out the
chance of a rate hike.

Gold surged to one-year high of $1,262.90 per ounce on Thursday,
rising over four percent in its biggest daily percentage gain
since September 2013. It last stood at $1,238.1.

U.S. crude futures hit a fresh 13-year low of $26.05 per barrel
on a rise in U.S. stockpiles, though they managed to pare losses
in volatile trade later in the day.

In early Asia, they traded at $27.33.

(Reporting by Hideyuki Sano; Editing by Eric Meijer)

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